Rent regulation in Spain: The New Competitiveness Warranty Index (IGC)

With its entry into force on 1 April 2015, Law 2/2015 introduces important changes for both urban and rural leases in Spain.

  • It opens the possibility that a landlord and tenant do not include a clause in the contract that requires updating the rent. In this case, the rent is not subject to revision.
  • It contemplates the possibility of a landlord and tenant freely agreeing on the formula used for updating the rent (variation of the Gross Domestic Product (GDP), the Housing Price Index (HPI), and the specific CPI on rentals, etc.).
  • It substitutes the CPI index with the IGC to update the rent in the absence of an express agreement between a landlord and tenant.

The Competitiveness Warranty Index is a new index promoted by the government to combat inflation and enhance Spain’s competitive position within the European Union.

Part of the corrected data for the Eurozone CPI is given for a determined period and is limited between 0% and the European Central Bank’s inflation target for the Eurozone (currently 2%).

Following the reform of the Law of Urban Leases (LAU) (add link to 48 2015), the Law modified the system of updating rent by permitting parties to freely determine the form of updating rent, detached from the CPI. Therefore, only in those cases where a landlord and tenant have not reached an agreement about the mechanism for updating the rent, the update is following the CPI.

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Please note that this article is not intended to provide legal advice.

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